UK and US seek to undermine China’s growing tech influence

China is looking to use new and important technologies such as digital currencies and satellite systems to control its own population and increase its influence globally, the GCHQ has warned, following the US decision to limit its own technological exports to the Asian giant.

In a RUSI Security Lecture, the head of the GCHQ, Sir Jeremy Fleming, is expected to say that while countries such as the UK seek to use new technology to enable prosperity, the Chinese government sees them as a “tool to gain advantage through control of their markets, of those in their sphere of influence and of their own citizens”.

Fleming has already spoken against the security implications of relying on Chinese economic support, which it described as having "a lot of strings attached", such as the need to adopt Chinese technology and thus make user data available to the Chinese state. 

“It’s creating the rules of the road; it’s imposing its values. It’s deploying its ideologies in ways that we think are against our national interests,” Fleming told BBC Radio 4’s Today programme.

During the annual security lecture, Sir Jeremy will highlight digital currencies operated by central banks as one key technology, suggesting China could use it to monitor the transactions of users at home, while also using it as a way of avoiding international sanctions in the future.

He will also focus on Chinese satellite technology as an area of concern, including as a means of tracking individuals and as a possible “anti-satellite capability” that could be deployed to “deny other nations access to space in the event of a conflict”.

Fleming is expected to say: “It is no surprise that while the Chinese nation has worked to build its advanced economy, the (Chinese Communist) Party has used its resources to implement draconian national security laws, a surveillance culture, and the increasingly aggressive use of military might. 

“We’re seeing that fear play out through the manipulation of the technological ecosystems which underpin our everyday lives – from monitoring its own citizens and restricting free speech to influencing financial systems and new domains.”

The UK's reticence towards Chinese technology is framed within a long-running technological dispute between Washington and Beijing, as US firms demand more government support to reduce reliance on components produced in Chinese factories.

The commercial conflict has escalated with the publication of a new set of export controls by US President Joe Biden. 

The new regulations include a measure to cut China off from certain semiconductor chips made anywhere in the world with US equipment, which has been interpreted as an attempt to slow down Beijing's technological and military advances.

If effective, the measures could hobble China's chip manufacturing industry by forcing any companies that use US technology to cut off support for some of China's leading factories and chip designers.

"This will set the Chinese back years," Jim Lewis, a technology and cyber-security expert at the Center for Strategic and International Studies (CSIS), told Reuters. "China isn't going to give up on chipmaking, but this will really slow them (down)."

However, senior government officials admitted that they had not secured any promises that allied nations would implement similar measures and that discussions with those nations are ongoing.

"We recognise that the unilateral controls we're putting into place will lose effectiveness over time if other countries don't join us," one official said. "And we risk harming US technology leadership if foreign competitors are not subject to similar controls."

The Semiconductor Industry Association said it was studying the regulations and urged the US to "implement the rules in a targeted way - and in collaboration with international partners - to help level the playing field."

China's commerce ministry has said in a statement that it firmly opposes the US move, as it hurts the normal trade and economic exchange between companies in the two countries and threatens the stability of global supply chains.

"The US should stop the wrongdoings immediately and give fair treatment to companies from all over the world, including Chinese companies," the statement said. 

China's foreign ministry spokesperson Mao Ning called the move an abuse of trade measures designed to reinforce the "technological hegemony" of the US.

The US has restricted China’s access to semiconductor technology since at least 2019 when the Trump administration banned Huawei from buying vital US technology. In August 2022, the US further prohibited the export of four technologies tied to semiconductor manufacturing, citing how they were “vital to national security” and signed an “historic” bill aimed at boosting the domestic production of semiconductors.

The rules, some of which take immediate effect, build on restrictions sent in letters this year to top toolmakers KLA Corp, Lam Research Corp and Applied Materials Inc, effectively requiring them to halt shipments of equipment to wholly Chinese-owned factories producing advanced logic chips.

The new regulations will also formalise letters sent to US chipmaker Nvidia by the US Department of Commerce to halt exports of some of their artificial intelligence (AI) technology to China, due to a potential risk of the products being used by, or diverted to, a “military end-user”.

In the UK, the government has ordered telecoms equipment from Chinese tech giant Huawei to be stripped out of the UK’s 5G network by 2027. 

Earlier today, E&T analysed the ramifications for the world’s largest chipmaker and many other leading semiconductor stocks, as they suffered from the first major reaction to new restrictions on US exports to China.